U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 002-97690-D
Kara International, Inc.
(Name of Small Business Issuer as specified in its charter)
Nevada 87-0421191
(State of other jurisdiction of (I.R.S. employer
Incorporation or organization) identification No.)
897 South Artistic Circle, Springville, UT 84663
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 489-3238
9005 Cobble Canyon Lane
Sandy, Utah 84093
(Former name, former address, and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Common Stock outstanding at May 12, 1997 - 4,559,761 shares at $.001 par
value Common Stock.
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1 Financial Statements
KARA INTERNATIONAL, INC.
[A Development Stage Company]
CONDENSED BALANCE SHEETS
[ Unaudited ]
ASSETS
March 31, December 31,
1997 1996
___________ ___________
CURRENT ASSETS:
Cash 141 163
Total Current Assets 141 163
OTHER ASSETS: - -
___________ ___________
$ 141 $ 163
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $2,073 723
Advance from shareholder 4,749 4,749
___________ ___________
Total Current Liabilities 6,822 5,472
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - -
Common stock 2,049 2,049
Capital in excess of par value 1,120,128 1,120,128
Retained Earnings (deficit) (1,134,783) (1,134,783)
Earnings (deficit) accumulated during the
development stage 5,925 7,297
___________ ___________
Total Stockholders' Equity (Deficit) (6,681) (5,309)
___________ ___________
$ 141 $ 163
___________ ___________
The accompanying notes are an integral part of these financial statements.
NOTE: The balance sheet at December 31, 1996 was taken from the audited
financial statements at that date.
2
<PAGE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF OPERATIONS
[Unaudited]
From
For the For the Inception on
Three Months Three Months January 1,
Ended Ended 1989 through
March 31, March 31, March 31,
1997 1996 1997
___________ ___________ ___________
REVENUE $ -- $ -- $ --
___________ ___________ ___________
EXPENSES:
General and administrative 1,372 23 8,580
Interest Expense -- -- 161,459
___________ ___________ ___________
Total Expenses 1,372 23 170,039
___________ ___________ ___________
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND DISCONTINUED
OPERATIONS (1,372) (23) (170,039)
CURRENT INCOME TAX EXPENSE -- -- --
DEFERRED INCOME TAX EXPENSE -- -- --
___________ ___________ ___________
(LOSS) BEFORE DISCONTINUED OPERATIONS (1,372) (23) (170,039)
(LOSS) FROM OPERATIONS OF DISCONTINUED
SUBSIDIARY (NO TAX EFFECT) -- -- (27,428)
GAIN ON DISPOSAL OF DISCONTINUED
SUBSIDIARY -- -- 203,390
NET INCOME (LOSS) $ (1,372) $ (23) $ 5,925
___________ ___________ ___________
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
CONDENSED STATEMENTS OF CASH FLOWS
[Unaudited]
From
For the For the Inception on
Three Months Three Months Jan. 1,1989
Ended Ended through
March 31, March 31, March 31
1997 1996 1997
___________ ___________ ___________
Cash Flows to Operating Activities:
Net income (loss) $ (1,372) $ (5,841) $ 5,925
Adjustments to reconcile net loss
to net cash used by operating
activities:
Non-cash expenses (income) -- -- (14,505)
Changes in assets and liabilities:
Accounts payable 1,350 723 2,073
___________ ___________ ___________
Net Cash Flows to Operating
Activities (22) (5,118) (8,507)
___________ ___________ ___________
Cash Flows to Investing Activities:
Net Cash to Investing Activities -- -- --
___________ ___________ ___________
Cash Flows from Financing Activities:
Proceeds from common stock issuance -- -- --
Advances by shareholders -- 4,668 6,648
___________ ___________ ___________
Net Cash from Financing Activities -- 4,668 6,648
___________ ___________ ___________
Net Increase (Decrease) in Cash (22) (450) 141
Cash at Beginning of Period 183 613 -
___________ ___________ ___________
Cash at End of Period $ 141 $ 163 $ 141
___________ ___________ ___________
Supplemental schedule of Non-cash Investing and Financing Activities:
For the three months ended March 31, 1997
None
For the period ended March 31, 1996:
None
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Condensed Financial Statements - The accompanying
financial statements have been prepared by the Company
without audit. In the opinion of management, all
adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial
position, results of operations, cash flows at March 31,
1997 and for all the periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction
with the financial statements and notes thereto included
in the Company's December 31, 1996 audited financial
statements. The results of operations for the period
ended March 31, 1997 are not necessarily indicative of
the operation results for the full year.
Organization - The Company was incorporated in the State
of Nevada under the name of R & D Connections on April
22, 1985. The Company completed a public offering of
common stock during 1986. On September 22, 1986, the
Company acquired all of the outstanding shares of Kara
Incorporated, a Utah corporation, that manufactured and
marketed candy, and changed its name to Kara
International, Inc. [the Company]. From September 1986,
the Company commenced operating the business of marketing
and developing confectionary products. The Company
abandoned its subsidiary operation during the last
quarter of 1988. The Company is not currently engaged in
any business activity, but is seeking potential
investments or business acquisitions and consequently is
considered a developmental stage company as defined in
SFAS No. 7. The Company has, at the present time, not
paid any dividends and any dividends that may be paid in
the future will depend upon the financial requirements of
the Company and other relevant factors.
Accounting Estimates - The preparation of the financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of
contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results
could differ from those estimated.
Stock Split - During January 1995, the Board of
Directors authorized a 1 for 250 reverse stock split of
the issued and outstanding common shares of the Company.
The Company retained the authorized shares at 50,000,000
shares with the par value at $.001 per share. The
financial statements for all periods presented have been
restated to reflect the effect of the common stock split.
NOTE 2 - RELATED PARTY TRANSACTIONS
Rent - The Company has not had a need to rent office
space. An officer of the Company is allowing the Company
to use his address, as needed, at no expense to the
Company.
Advance from Shareholder - At March 31, 1997 and December
31, 1996 the unpaid balance owing a shareholder/officer
was $4,479.
Stock Issued - In January, 1995, the Company issued
1,899,048 shares to shareholders and officers to reduce
shareholder advances.
5
<PAGE>
KARA INTERNATIONAL, INC.
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Management Compensation - During the periods presented
the Company did not pay any compensation to its officers
and directors.
NOTE 3 - DISCONTINUED OPERATIONS
On September 22, 1986, the Company acquired all of the
outstanding shares of Kara Incorporated, a Utah
corporation, by the issuance of 35,967 (restated) shares
of the Company stock to the shareholders of Kara
Incorporated in a tax free reorganization wherein Kara
Incorporated became a wholly-owned subsidiary of the
Company. The business combination was accounted for
using the purchase method of accounting. The investment
in the subsidiary was recorded in the financial
statements based on the net asset value of the subsidiary
at June 30, 1986, which was $146,992. Kara Incorporated
manufactured and marketed candy. The Company operated
its subsidiary candy company through 1988. During the
last quarter of 1988, the Company abandoned and
discontinued all of its candy manufacturing and marketing
operations. All of the assets of the company were
foreclosed and used to satisfy liabilities. At the point
in time when the company discontinued all of its candy
manufacturing and marketing operations. All of the
assets of the company were foreclosed and used to satisfy
liabilities. At the point in time when the company
discontinued its operations, there were 69,762 shares of
common stock issued and outstanding. The Company also
had certain notes payable that were not satisfied from
the discontinued operation. During 1994, in settlement
of a judgment from the court, the Company issued 80,000
shares of common stock to satisfy the notes payable
including principal of $270,000 and accrued interest of
$161,459. The discontinued operations have been
segregated on the Statements of Operations. There was a
$203,390 gain recorded during 1989 for the disposal of
the discontinued operations.
NOTE 4 - COMMON STOCK
Public Stock Offering - The Company previously completed
a public offering of 10,615 shares of its authorized but
unissued common stock. The offering was registered on
Form S-18 in accordance with the Securities Act of 1933.
Total proceeds of the offering amounted to $265,360 and
stock offering costs of $68,251 were offset against
capital in excess of par value.
Debt Cancellation - During November, 1994, the Company
issued 80,000 shares of common stock as payment in full
for a judgment related to a note payable of $270,000 and
related accrued interest of $161,459.
Officer/Shareholder - In January, 1995, the Company
issued 1,899,048 shares of common stock to shareholders
and officers to repay previous advances made by the
shareholders.
Stock Split - During January 1995, the Board of Directors
authorized a 1 for 250 reverse stock split of all the
issued and outstanding common shares of the Company. The
Company retained the authorized shares at 50,000,000
shares with the par value at $.001 per share. The
financial statements for all periods presented have been
restated to reflect the reverse split.
6
<PAGE>
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared
in conformity with generally accepted accounting
principles which contemplate continuation of the Company
as a going concern. However, the Company has incurred
losses since inception, has expended most of its working
capital and has not yet been successful in establishing
profitable operations. These factors raise substantial
doubt about the ability of the Company to continue as a
going concern. In this regard, management is proposing
to raise additional funds through loans and/or through
additional sales of its common stock or through the
acquisition of another company by issuing common stock.
There is no assurance that the Company will be successful
in raising this additional capital.
The financial statements do not include any adjustments
relating to the recoverability and classification of
recorded asset amounts or the amounts and classification
of liabilities that might be necessary should the company
be unable to obtain additional financing or establish
profitable operations.
NOTE 6 - CONTINGENCIES
During 1989, the Company discontinued the candy
manufacturing and marketing operations of its subsidiary.
Management believes that the Company is not liable for
any existing liabilities related to its former operations
and subsidiary but the possibility exists that creditors
and others seeking relief from the subsidiary may also
include the Company in claims and suits pursuant to the
parent subsidiary relationship which existed between the
Company and its subsidiary. The Company is not currently
named in any such suits nor is it aware of any such suits
against is former subsidiary. It is the belief of
Management and their Counsel that the Company would be
successful in defending against any such claims and that
no material negative impact on the financial position of
the Company would occur. Management and counsel further
believe that with the passage of time the likelihood of
any such claims being raised is becoming more remote and
that various Statutes of Limitations should provide
adequate defenses for the Company. Consequently, the
financial statements do not reflect any accruals or
allowances for any such claims.
The Company has approximately 340 shares of common stock
outstanding for which it is unable to identify a
shareholder. The Company is contingently liable should
the unidentified shares someday be traded to a third
party. The shares are not included in the outstanding
stock of the Company.
NOTE 7 - SUBSEQUENT EVENTS
Stock Split - During April 1997, the Board of Directors
authorized a 1 for 5 reverse stock split of all issued
and outstanding common shares of the Company. The
Company retained the authorized shares at 50,000,000
shares with the par value at $.001 per share.\
Change in Officers - During April 1997, the Board of
Directors unanimously accepted the resignation of all
current directors and executive officers and appointed a
new officer to serve as sole director, president and
secretary of the Company.
Stock Issuance - During April 1997, the Company issued
4,000,000 post-split shares of its "unregistered" and
"restricted" common stock to the appointed sole officer
in consideration of the sum of $20,000 cash, effectively
passing control (90%) to the new officer.
7
<PAGE>
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
None
ITEM 2 Change in Securities
None
ITEM 3 Defaults on Senior Securities
None
ITEM 4 Submission on Matters to a Vote of Security Holders
None
ITEM 5 Other Information
None
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K; Filed April 11, 1997
ITEM 1. Changes in Control of Registrant
(a) On April 10, 1997, the Board of Directors of the
Registrant adopted, ratified and approved a resolution to
issue 4,000,000 post-split (see Item 5 below respecting a
reverse split of the outstanding voting securities of the
registrant [all computations herein reflect such reverse
split]) "unregistered" and "restricted" shares of its one
mill ($.001) par value common voting stock to David N.
Nemelka, in consideration of the sum of $20,000 paid by
personal check from Mr. Nemelka. The issuance of these
securities was subsequent to the filing of a Certificate
with the Secretary of State of Nevada, respecting such
reverse split; this Certificate was filed on April 11, 1997.
See Item 7.
The former principal stockholders of the Registrant and
their percentage of ownership of the outstanding voting
securities of the Registrant prior to the adoption of the
resolution were, to-wit:
Amount of Nature Percent
Of Beneficial Of
Name Title Ownership Class
David C. Merrell President and 393,864* 70%
9005 Cobble Canyon Ln. Director
Sandy, Utah 84093
Michael C. Brown Secretary/Treasurer 54,000 9.6%
2159 Alta Cove Cr. And Director
Sandy, Utah 84093
* Of this amount, 327,808 shares are held in
the name of Chiricahua Company, a sole proprietorship
owned by David C. Merrell, and 16,056 shares are held
in the name of Corie Merrell, who is the wife of David
C. Merrell.
Mr. Nemelka used his personal funds to purchase these
securities; and the basis of the "control" by Mr. Nemelka is
stock ownership. See the table below under Paragraph (b) of
this Item.
8
<PAGE>
(b) The following table contains information
regarding shareholdings of the Registrant's
directors and executive officers and those
persons or entities who beneficially own more
than 5% of the Registrant's common stock, after
taking into account the adoption of the
resolution to issue 4,000,000 "unregistered" and
"restricted" shares to Mr. Nemelka:
Amount of Nature Percent
Of Beneficial Of
Name Title Ownership Class
David N. Nemelka President,Director 4,000,000 87.7%
897 S. Artistic Circle and Stockholder
Springville, UT 84663
David C. Merrell Stockholder 393,864* 8.6%
9005 Cobble Canyon Ln.
Sandy, UT 84093
All officers and directors
as a group(1) 4,000,000 87.7%
Item 2. Acquisition or Disposition of Assets.
Except as indicated under Item 1, none; not
applicable.
Item 3. Bankruptcy or Receivership.
None; not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
None; not applicable.
Item 5. Other Events.
Effective April 11, 1997, the Registrant's
outstanding common voting stock was reversed split
on a basis of one for five, while retaining the
authorized shares at 50,000,000 and the par value
at $0.001, with appropriate adjustments in the
stated capital and additional paid in capital
accounts of the Registrant. A copy of the
Certificate respecting this reverse split which
was filed with the Secretary of State of Nevada on
April 11, 1997, is attached hereto and incorporated
herein by reference. See Item 7.
Item 6. Resignations of Directors and Executive Officers.
Effective April 11, 1997, David C. Merrell and
Michael C. Brown resigned as directors and
executive officers of the Registrants, in
seriatim, and David N. Nemelka, was designated as
the sole Director, President and Secretary.
Item 7.Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
None; not applicable.
(b) Pro Forma Financial Information.
None; not applicable.
(c) Exhibits.
9
<PAGE>
Exhibit
Description of Exhibit* Number
Certificate Respecting Reverse Split 3
* Summaries of any exhibit are
modified in their entirety by this reference to
each exhibit.
Item 8. Change in Fiscal Year.
None; not applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
None; not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned
hereunto duly authorized.
KARA INTERNATIONAL, INC.
Date: By /s/ David N. Nemelka
President, Secretary and Director
10
<PAGE>
CERTIFICATE OF KARA INTERNATIONAL, INC.,
A NEVADA CORPORATION,
PURSUANT TO SECTION 78.207 (4) OF THE
NEVADA REVISED STATUTES
FIRST: The name of the corporation is Kara International,
Inc. (the "Company").
SECOND: On April 9, 1997, the Board of Directors of the
Company and the majority stockholder unanimously consented
to a reverse split of the Company's outstanding common stock
in the ratio of one new share for every five shares
outstanding as of the date of filing of this Certificate,
with fractional shares being rounded up to the next whole
share, while retaining the current authorized shares and par
value, with appropriate adjustments to the additional paid
in capital and stated capital accounts of the Company.
THIRD: The number of authorized shares and the par value
of the Company's common stock immediately before the above-
referenced resolutions were 50,000,000 shares at one mill
($0.001), respectively.
FOURTH: The number of authorized shares and the par value
of the Company's common stock immediately after the above-
referenced resolutions were 50,000,000 shares and one mill
($0.001), respectively.
FIFTH: The number of shares of the Company's common stock
to be issued after the reverse split in exchange for each
pre-split share of common stock is 1/5 of one share.
SIXTH: No fractional shares will be issued as a result of
the reverse split. There is no provision for the payment of
money or the issuance of scrip to stockholders otherwise
entitled to a fraction of a share as a result of the reverse
split.
SEVENTH: The approval of the affected stockholders is not
required and has not been sought; however, persons who own a
majority of the outstanding voting securities of the Company
have adopted, ratified and approved the reverse split.
EIGHTH: The above-referenced resolutions will be effective
as of the date of filing of this Certificate with the
Secretary of State of the State of Nevada.
IN WITNESS WHEREOF, the undersigned executive officers of
the Company hereby execute this Certificate on the 10th day
of April, 1997.
/s/David C. Merrell,
President
/s/ Michael C. Brown,
Secretary/Treasurer
STATE OF UTAH }
} ss
COUNTY of SALT LAKE }
David C. Merrell and Michael C. Brown, hereby acknowledge
that they are the President and Secretary/Treasurer,
respectively, of Kara International, Inc., that they have
read the foregoing information, and of their personal
knowledge, represent and warrant that such information is
true and correct in every material respect.
11
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 141
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 141
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 141
<CURRENT-LIABILITIES> 6,822
<BONDS> 0
0
0
<COMMON> 2,049
<OTHER-SE> (8,730)
<TOTAL-LIABILITY-AND-EQUITY> 141
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,372
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,372)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,372)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,372)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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